Back in Black

Sorry for anyone here in the Cafe that's a bit bleary eyed this morning, as I'm cranking up the AC/DC in honour of our global airline industry:

(you know the guitar riff already so sing along in your head...)

Back in black
I hit the sack
I've been too long I'm glad to be back
Yes, I'm let loose
From the noose
That's kept me hanging about
I've been looking at the sky
'Cause it's gettin' me high
Forget the hearse 'cause I never die
I got nine lives
Cat's eyes
Abusin' every one of them and running wild
(Copyright 1980; B. Young, A. Young, B. Johnson)

You may ask if I've hit the espresso a bit hard this morning. But after some of my recent posts worrying about the supposed drop in premium traffic as well as the frenetic airfare discounting happening in some markets, you can forgive me if I'm now happy to hear that the airlines' worst days are behind them. Cut loose indeed - keep flyin' high boys!

IATA this week announced that they now expect airlines to post a global profit of $2.5 billion in 2010. According to IATA (http://www.iata.org/pressroom/pr/Pages/2010-06-07-01.aspx) "This is a major improvement compared with IATA’s previous forecast released in March of a $2.8 billion loss." A $5.3B turnaround? Yep, I'd say that is quite a major improvement.

Although good news for the travel industry as a whole (after all, a bankrupt airline industry is essentially a bankrupt travel industry) it also didn't stop IATA from taking a swipe at some classic "bad guys" in the industry group's eyes. Well at least the eyes of Signore Bisignani, IATA's Director General and CEO.

In the above referenced press release, Mr. Bisignani said the following: "Seeing black on the bottom line is a great achievement. The resilience of the industry has been strengthened by a decade of cost cutting, restructuring and re-engineering processes. IATA’s programs have contributed to this with $47 billion in cost savings since 2004 with efficiencies in safety auditing, fuel management, infrastructure costs, and Simplifying the Business.

"But even with all of our hard work, the result is just a 0.5% margin that does not even cover our cost of capital. The industry is fragile. The challenge to build a healthy industry requires even greater alignment of governments, labor, and industry partners. They must all understand that this industry needs to continue to reduce costs, gain efficiencies and be able to re-structure itself if it is to be sustainably profitable. We must all be prepared for a greater change,” said Bisignani.

All very true, and certainly all valid points.

But then in a speech delivered to IATA members in Berlin also this week, Mr. Bisignani blasted GDS's in particular saying: "they (GDS's) are leeches charging at least $4 per transaction when China Travel Sky does it for just $1.20. On top of that, they sell you your data with a seven-digit price tag. That is pure profit. BASTA. We will break their monopoly on your data with a cost-effective solution."

Yikes. As the old west cowboys used to say, "dem's fightin' words."

Which concerns me, as in his prepared comments in the press release about airlines coming back to profitability he professed the need for "greater alignment...of industry partners." Is yelling (albeit in Italian, which does sound cool doesn't it?) at those same partners his method of "alignment?"

Of course, Mr. Bisignani could be taking inspiration from the hard rockin' Aussies in Acca Dacca by "running wild." Perhaps being "back in black" isn't all that great for the industry after all? Depends on how you spin the tune, I guess.